Konstantin V. Ordov, Juliya S. Tsertseil, &
Nadezhda A. Zatsarnaya
Prospects for the Development of the Market
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186 240 288
760
0 200 400 600 800
2018 2019 2020 2021
Figure 1. Dynamics of the volume of the carbon market in the world for the period 2018– 2021, billion euros
Source: Compiled by the authors based on site data https:// www.stati sta.com/ sta tist ics/ 1334 848/ glo bal- car bon- mar ket- size- value/
As part of the methodological and methodological support for the greenhouse gas market in Russia, it is necessary to develop:
• methodology for estimating carbon credits;
• new financial instruments based on carbon credits;
• methods for assessing the economic efficiency of natural and climatic projects;
• rules regarding the process of issuing, trading and financial evaluation of carbon credits and climate projects;
• digital financial assets based on a carbon unit.
One of the promising tools to achieve these goals is the issuance of green bonds.
2. Discussion
Simultaneously with the market for carbon credits, the green bond market is currently emerging, which is also considered as a tool for minimizing carbon dioxide emissions. These categories pursue the same goal, but from different positions. While the carbon credit market aims to reduce the carbon footprint of existing businesses, green bonds act as a source of funding for projects with environmental benefits that avoid carbon footprint.
The green bond market is actively developing, as can be seen in Figures 2 and 3.
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119.28 121.4
123.49
124.78 124.47
125.84
122.98
120.75
118 119 120 121 122 123 124 125 126 127
Figure 2. Dynamics of the Green Bonds Index S&P, 2023
Source: Compiled by the authors based on site data https:// www.spglo bal.com/ spdji/ en/ indi ces/ esg/
sp- green- bond- index/ #overv iew
139.14 135.48 131.94
122.76 125.1
138.02 134.15 142.24 158.42
147.87
119.51 100
110 120 130 140 150 160 170
01-01-13 01-05-13 01-09-13 01-01-14 01-05-14 01-09-14 01-01-15 01-05-15 01-09-15 01-01-16 01-05-16 01-09-16 01-01-17 01-05-17 01-09-17 01-01-18 01-05-18 01-09-18 01-01-19 01-05-19 01-09-19 01-01-20 01-05-20 01-09-20 01-01-21 01-05-21 01-09-21 01-01-22 01-05-22 01-09-22 01-01-23
Figure 3. Dynamics of the Green Bonds Index S&P for the period from 2013 to 2023 Source: Compiled by the authors based on site data https:// www.spglo bal.com/ spdji/ en/ indi ces/ esg/
sp- green- bond- index/ #overv iew
In this regard, various authors are conducting research to identify the interdependence and influence of the green bond market and the carbon unit market. Xiaohang Rena et al. (2022) consider the prospects for building investment portfolios involving both green bonds and derivatives traded on the carbon market, focusing on the S&P Green Bond Index. Marín- Rodríguez et al. (2022) introduce the notion that green bonds play a key role in financing sustainable infrastructure systems. At the same time, the authors introduce both the volume of carbon dioxide emissions and oil prices as factors influencing the development of the green bond market.
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It is interesting to note that the main difference between this type of bonds and traditional ones is that the funds received from the issue will be used to implement new or existing projects to reduce emissions into the atmosphere, renewable energy sources, and the like (Lysenko, 2019).
The OECD Report (2015) identifies several forms of green bonds:
• Corporate bond • Project bond
• Asset- backed security (ABS)
• Supranational, sub- sovereign and agency (SSA) bond • Municipal bond
• Financial sector bond.
Also, the OECD Report (2015) presents a complete matrix of green bond issuance areas by industry, which is reflected in Table 1.
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Table 1. Matrix of directions for issuing green bonds in different sectors of the economy EnergyLow- carbon buildingsIndustry& energy intensive commercial Waste & pollution control TransportInformation technology & communications Agriculture forestry & land use
Adaption SolarNew residentialManufacturingRecycling facilitiesLow- carbon transportPower managementAFOLU mitigationWater WindNew commercialEnergy efficiency processesRecycling products & circular economy
VehidesTele- conferencingAFOLU adaptationEnergy BioenergyRetrofitEnergy efficiency productsWaste to energyPublic transportResource efficiencyAgricultural productsIndustry & waste GeothermalProducts for building carbon efficiency
Retail & wholesaleGeo- sequestrationBus rapid transportTransport MarineData centersAlternative fuel infrastructureICT Dedicated transmissionProcess & fugitive emissionsWater- borneBuilding Energy distribution & management
Energy efficient applianceFood supply Combined heat & powerCoastal Source: Retrieved from https:// www.oecd.org/ environment/ cc/ Green%20bonds%20PP%20%5Bf3%5D%20%5Blr%5D.pdf
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Issuing green bonds has a number of advantages:
• opportunity to attract new investors;
• investor confidence, especially since the implementation of a green bond issue has higher reporting and disclosure requirements than traditional bonds;
• brand awareness and value: the prospect of introducing more innovative methods and sustainability to investors.
“Green” bonds can be issued not only by corporate companies, but also by the government of the country. The funds received can be invested in the development of innovative infrastructure through “long” money. It is assumed that environmental projects could be financed through the issuance of “green”
bonds, which could be bought by the Bank of Russia, domestic and foreign investors. With this model, debt sources of financing develop, and part of the funds remains in the real sector of the economy (Lysenko, 2021). At the same time, this contributes to the active reduction of carbon emissions.
In 2018, the first issue of green bonds in Russia in the amount of 1.1 billion rubles. carried out by a regional company. In 2019 and 2020, the average green bond issue amounted to RUB 12.2 billion. and 10.5 billion rubles, respectively.
In 2021, larger issuers entered the Russian market, which was reflected in the growth of the average amount of funds raised to RUB 16.3 billion (ESG and Russia’s Green Finance 2018– 2022 Report, 2022).
Today in the Russian Federation there is a steady trend toward reducing carbon emissions. This is facilitated by the provisions of the Federal Law of July 2, 2021, No. 296FZ “On Limiting Greenhouse Gas Emissions.” This document establishes the legal basis for mandatory carbon reporting, due to start in 2023 for the most polluting companies, and carbon offset schemes. This is an integral element in resolving issues of ESG orientation, which is reflected in Figure 4.
35.32 35.58 35.56 35.52 36.1
36.83 36.1
36.83 37.08 35.36
37.12
34 34.5 35 35.5 36 36.537 37.5
2013 2014 2015 2016 2017 2018 2017 2018 2019 2020 2021
Figure 4. Dynamics of global carbon dioxide (CO2) emissions for the period 2013–
2021, billion tons
Source: Compiled by the authors based on site data https:// www.stati sta.com/ sta tist ics/ 1334 848/ glo bal- car bon- mar ket- size- value/
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In Figure 5, these data for different countries are presented for 2021.
11.472
5.007
2.71 1.756
1.067 0.749 0.675 0.672 0.619
0 2 4 6 8 10 12 14
China USA India Russia Japan Iran Germany Saudi
Arabia
Indonesia
Figure 5. Volumes of carbon dioxide emissions in different countries in 2021, billion tons
Source: Compiled by the authors based on site data https:// www.stati sta.com/ sta tist ics/ 1334 848/ glo bal- car bon- mar ket- size- value/
It should be noted that the volumes of carbon dioxide emissions in different countries are directly related to the development of the market for green financial instruments in these countries. For example, in 2020, the bulk of the issue was placed by issuers from the Asia- Pacific region— $1.7 billion. Issuers from China— $786 million, Japan— $714 million, USA— $489 million were the largest issuers. Major issues were made by the Japanese company JRTT in the amount of $388 million and the Russian company RZD Capital Plc, which is part of the Russian Railways group of companies, in the amount of $257 million.
According to statistics in Jean- Florent Helfre and Elise Depetiteville (2022), the largest volume of green bond issuance is registered in the Renewable electricity and heat production sector, followed by the Transport sector by a fairly large margin, followed by the Building sector.
Consider the dynamics of the development of the green bond market in the world in the context of industries. To this end, we will single out groups: leading industries, medium industries and outsider industries. Figures 6– 8 show the dynamics of green bond issues by industry in the world in 2021.
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363 312
273
152 134 127
500 100150 200250 300350 400
Electric Utilities
(NEC) Real Estate Rental, Development &
Operations (NEC)
Corporate Financial Services (NEC)
Corporate Banks Construction &
Engineering (NEC)
Public Finance Activities
Figure 6. Number of green bond issues by leading industries in 2021, number of issues Source: Compiled by the authors based on data from the Refinitive information and analytical terminal
As we can see, in the context of the leading industries, there is a fairly large spread in the volume of green bond issues in the world, according to Figure 6. The range of variation in the number of issues in the leading industries is from 127 to 363 issues in 2021. The largest number of green bond issues in 2021 was recorded in the electric power industry (363 issues), the rental, development and operation of real estate industry (312 issues), as well as corporate financial services (273 issues). The remaining leading industries are characterized by almost the same distribution of green bond issuance volumes: the corporate banking sector (152 issues), construction and design (134 issues) and public finance activities (127 issues).
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78 75 75
6865 64 62 62 57
51 50 49 45 44 42
38 37 36 36 35
33 33 32 32 31 3128
0 10 20 30 40 50 60 70 80
Figure 7. Number of green bond issues by “medium” industries in 2021, number of issues
Source: Compiled by the authors based on data from the Refinitive information and analytical terminal
The second group, which forms the “medium” industries, according to Figure 7, includes industries of alternative forms of energy: solar power plants (75 outputs), photovoltaic solar systems (68 outputs), hydropower and tidal energy (62 outputs).
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25 25 23 23
21 20
19 19 19 18 18 18
17 17 17 17 16 16 16
14 14 14 13 13
12 11 11 11 11 1110 10 10 10 10
0 5 10 15 20 25 30
Industrial REITs Investment Management & Fund… Retail Real Estate Rental & Development Wind Electric Utilities Office REITs Residential REITs Retail & Mortgage Banks Inter-Modal Passenger Transportation Water Supply & Irrigation Systems Rail Services Railway Construction Electrical Transmission & Grid Equipment Real Estate Services (NEC) Semiconductors (NEC) Railway Operators Waste Management, Disposal &… Highway Operators Environmental Services & Equipment… Oil & Gas Refining and Marketing (NEC) Diversified Investment Services Investment Banking Fossil Fuel IPPs Auto & Truck Manufacturers (NEC) Commercial Buildings Paper Products (NEC) Import-Export Banks Life & Health Insurance (NEC) Batteries & Uninterruptable Power Supplies Forest & Wood Products (NEC) Plastics Integrated Telecommunications Services… Shell Companie
s Investment Management Consumer Credit Cards Services Highway & Bridge Construction
Figure 8. Number of green bond issues by outsider industries in 2021, number of issues Source: Compiled by the authors based on data from the Refinitive information and analytical terminal
According to Figure 8, the range of variation in the number of issues in outsider industries is from 10 to 25 issues in 2021. Ordov et al. (2022) also wrote about this in their study.
As an example, we also considered the dynamics of a decrease in the volume of electricity use in the economy of the Russian Federation for the period 2012–
2021 (Figure 9).
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327.2 358.9
324.4 343.9
332.4 349.0
333.4 342.4
312.5 311.4 310.0
320.0 330.0 340.0 350.0 360.0 370.0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Figure 9. Dynamics of the actual consumption of electricity supplied by diesel power plants (powered by internal combustion engines) per unit of certain types of manufactured products and services in the Russian Federation for the period 2012–
2021, thousand kWh
Source: Compiled by the authors based on site data https:// ross tat.gov.ru/ sta tist ics/ accou nts
The rate of reduction in the consumption of electricity supplied by diesel power plants (operated by internal combustion engines) per unit of certain types of manufactured products and services in the Russian Federation for the period 2012– 2021 is shown in Figure 10.
1.000 1.097
0.904 1.060
0.967 1.050
0.955 1.027
0.913 0.997
0.800 0.850 0.900 0.950 1.000 1.050 1.100 1.150
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Figure 10. The rate of decrease in the volume of electricity consumption supplied by diesel power plants (powered by internal combustion engines) per unit of certain types of manufactured products and services in the Russian Federation for the period 2012–
2021, shares of units
Source: Compiled by the authors based on site data https:// ross tat.gov.ru/ sta tist ics/ accou nts
In Figure 10, we see that, in general, in the economy of the Russian Federation, there is a decrease in actual fuel consumption per unit of certain types of
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products or services produced, which, in general, can be considered as a positive prerequisite for the development of the green bond market and an increase in their efficiency as a result of their use as sources financing of project activities by business entities.
It is worth noting that through the issuance of green bonds, issuers attracted financing for the implementation of projects in the energy sector, real estate, waste management, engineering, as well as in the financial and transport sectors.
Among issuers of green bonds there are companies of both federal and regional levels. Projects financed through the issuance of green bonds are implemented both in the Russian Federation (e.g., PJSC Russian Railways) and in the territories of individual constituent entities of the Russian Federation, including the Khanty- Mansiysk Autonomous Okrug— Yugra, Moscow, St. Petersburg, the Republic of Adygea, Stavropol Territory, as well as Astrakhan, Rostov and Moscow regions. At the beginning of 2022, the leading industry segment among issuers of bonds in the format of sustainable development was transport sector (ESG and Russia’s Green Finance 2018– 2022 Report, 2022).
Despite the fact that green bonds are a fairly new tool, they have a number of significant advantages, in addition to those already mentioned in this scientific article. Additionally, the following advantages of green bonds can be distinguished:
• they can be classified as cheap “long” money;
• governments of countries can act as issuers;
• they can be considered as a tool for financing the fight against environmental threats;
• they can be seen as a tool for shaping investors’ perceptions of responsible behavior;
• they can be seen as a tool for diversifying funding sources.
These advantages contribute to their rapid spread and development, expansion of the scope and market of their circulation. There is a clear trend toward support for green investment in the Russian market, and in the future there may be new incentives for issuers and more attractive green bonds for investors. To actively develop this product in Russia, there are several ways. First, it is necessary to reduce the tax burden on investors who buy green bonds. Secondly, large funds should dedicate part of their assets to green bonds (Morozova et al., 2021).
The development of this instrument in Russia makes it possible to stand on a par with leading countries, attract new investors to the market, which can reverse the negative trend in the outflow of capital from the country, and also solve environmental problems, which is in line with the provisions of the Kyoto and Paris agreements.
157 Prospects for the Development of the Market of Carbon Units
3. Conclusion
At the end of the study, we can say that when considering the level of development of the most involved industry in the field of issuing green bonds— the electric power industry of the Russian Federation, we can note the positive dynamics of its development.
At the same time, according to the official website of the Federal State Statistics Service of the Russian Federation, the share of renewable sources in electricity generation is constantly increasing. In 2020, this figure was 19.8 %. For the period from 2012 to 2020, there is a steady forward movement in the change in this indicator from 15.3 % to 19.8 %, respectively.
These results can be viewed as positive regarding the prospects for the development of the industry, taking into account the ESG orientation.
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